Application Supported by Blocked Amount (ASBA)

Table of Contents
1. Introduction
2. What is ASBA?
3. How ASBA works - Procedure
4. Eligibility criteria
5. Documents and details required in an ASBA application
6. List of banks offering ASBA facility (as on 25 January 2016)
7. Benefits of ASBA
8. Limitations and practical considerations
9. Example (illustrative)
10. Conclusion
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Introduction

Banks play a pivotal role in primary markets. ASBA is the service provided by banks to facilitate subscription to new issues of securities without requiring immediate debit of application money.

• ASBA stands for Application Supported by Blocked Amount (ASBA). It is an application mechanism that helps investors subscribe to Initial Public Offers (IPOs), rights issues and Follow-on Public Offers (FPOs) made through the book building route.
• Under ASBA the applicant's money remains in his/her bank account until the shares are allotted. The process was introduced by SEBI for retail investors in 2008 and was extended to other classes of investors subsequently. From 1 January 2010 certain extensions were provided and, with effect from 1 May 2010, SEBI permitted broader usage of ASBA in public issues.
• ASBA requires the applicant to give an authorisation to the bank to block the application money in the bank account for subscribing to the issue. The account is debited only if shares are allotted or when the issue is withdrawn/failed and a debit is required as per rules.

What is ASBA?

ASBA is an application containing an authorisation to block the application money in the investor's bank account for subscribing to an issue. When an investor applies through ASBA, the application money remains in the investor's account earning interest; it is debited only if the application receives allotment after the basis of allotment is finalised, or when the issue is withdrawn or fails and a refund is processed.

• ASBA co-exists with the traditional process of submitting a cheque; an issuer may permit both modes during an issue as per the offer document.
• ASBA is used for subscribing to public issues, rights issues and Follow-on Public Offers where permitted, especially those conducted through the book building route.

How ASBA works - Procedure

1. The investor fills the ASBA application form (physical ASBA form or an online ASBA facility available through netbanking) and submits it to a designated bank branch that is authorised to accept ASBA applications. The investor provides application details and authorises the bank to block the application amount in the bank account.
2. The bank verifies the investor's details and available balance. On successful verification the bank blocks the specified amount in the investor's account; the blocked amount remains part of the account balance but is not available for withdrawal.
3. The Self Certified Syndicate Bank (SCSB) uploads the ASBA application information to the stock exchange/Registrar or forwards it to the intermediaries as per the prescribed systems and timelines.
4. After the issue closes and the basis of allotment is finalised, the Registrar of the issue provides allotment instructions. The bank debits the investor's account only to the extent of securities allotted. The unallotted portion of the blocked funds is released back to the investor immediately.
5. If the issue is withdrawn or fails, the blocked amount is released and the investor is not debited.

Role of Self Certified Syndicate Banks (SCSBs)

• SCSBs are banks authorised to accept ASBA applications and to block funds in the applicants' bank accounts. They are responsible for verifying applicant details, blocking the application amount, and forwarding/uploading the ASBA application data to the receiving system (Registrar or stock exchange) as per SEBI regulations.
• The investor must submit the ASBA application only to a bank branch or through the netbanking facility of a bank that is an SCSB for that issue.

Eligibility criteria

SEBI specifies who may apply through ASBA. The broad position (as applicable in the referenced periods) was:

• For public issues, with effect from 1 May 2010, investors were permitted to apply through ASBA as specified in the offer and by the banks handling the issue.
• For rights issues, shareholders on the record date are permitted to use ASBA provided certain conditions are met, including dematerialised holdings where required.

For rights issues where ASBA is permitted, the shareholder should:

• Be holding shares in dematerialised form and have applied for entitlements in dematerialised form.
• Have applied for additional shares (if applicable) in dematerialised form.
• Not have renounced the entitlements in full or in part (if renouncement affects eligibility as specified in the offer).
• Not be a renouncee unless the offer explicitly permits renouncees to use ASBA and they satisfy specified conditions.

Documents and details required in an ASBA application

• PAN (Permanent Account Number) - as required for securities applications.
• DP ID - for dematerialised accounts (if allotment is to be credited to demat).
• Client ID - demat account client identifier.
• Bid quantity - number of shares or lots applied for and the bid price if applicable.
• Bank account number - bank account to be blocked for the application amount.
• Any other details required by the specific issue or by the accepting bank (for example investor category, signature verification, contact details).

The bank account is debited only after the basis of allotment is finalised, or the IPO is withdrawn or fails. For rights issues the application money is debited after receipt of instructions from the Registrar as per the timetable in the offer document.

List of banks offering ASBA facility (as on 25 January 2016)

• Axis Bank Ltd
• State Bank of Hyderabad
• Corporation Bank
• State Bank of Travancore
• IDBI Bank Ltd
• State Bank of Bikaner and Jaipur
• YES Bank Ltd
• Punjab National Bank
• Deutsche Bank
• Union Bank of India
• HDFC Bank Ltd
• Bank of Baroda
• ICICI Bank Ltd
• Vijaya Bank
• Bank of Maharashtra
• State Bank of India
• Andhra Bank
• HSBC Ltd
• Kotak Mahindra Bank Ltd
• Bank of India
• CITI Bank N.A.
• IndusInd Bank
• Allahabad Bank
• Karur Vysya Bank Ltd
• The Federal Bank
• Indian Bank
• Central Bank of India
• Oriental Bank of Commerce
• Standard Chartered Bank
• J P Morgan Chase Bank N.A.
• Nutan Nagarik Sahakari Bank Ltd
• UCO Bank
• Canara Bank
• United Bank of India
• Syndicate Bank
• South Indian Bank
• Indian Overseas Bank
• Tamilnad Mercantile Bank Ltd
• City Union Bank Ltd
• BNP Paribas
• The Kalupur Commercial Cooperative Bank Ltd
• The Lakshmi Vilas Bank Ltd
• State Bank of Patiala
• State Bank of Mysore
• The Surat Peoples Co-op Bank Ltd
• Dhanlaxmi Bank Limited (has applied for new licence, as the previous one expired)
• The Saraswat Co-Operative Bank Ltd
• DBS Bank
• Dena Bank
• Karnataka Bank Ltd
• The Ahmedabad Mercantile Co-Op. Bank Ltd
• ING Vysya Bank (merged with KMB)
• Janata Sahakari Bank Ltd
• Barclays Bank PLC
• Rajkot Nagarik Sahakari Bank Ltd

Benefits of ASBA

1. The investor need not pay the application money by cheque; instead the application amount is blocked in the bank account to the extent of the application money and the investor continues to earn interest on the balance.
2. The investor does not have to wait for refunds. Only the amount proportionate to the securities allotted is debited from the bank account when the application is selected for allotment; the unallotted portion is released.
3. The application form and the process are straightforward and typically simpler for the investor when using the bank's native forms or netbanking facility.
4. The investor deals with a known intermediary - his/her own bank - thereby reducing the need to interact with external refund processes.
5. No loss of interest on funds during the period between application and allotment since the funds remain in the investor's account until debited for allotment.
6. Blocked amount is considered part of the account balance for interest calculation (subject to the bank's interest rules and account type).
7. The customer can revise or withdraw the bid before the end of the issue in the prescribed format with the bank (as permitted by the issue terms).

Limitations and practical considerations

• ASBA is available only through banks designated as SCSBs for a particular issue; investors must use those banks or their authorised netbanking channels.
• The investor must ensure sufficient funds in the bank account until the basis of allotment is finalised; if funds are not available the application may be rejected.
• Allotment is credited to the demat account if the investor provides correct DP ID and Client ID; applicants without demat accounts must follow the offer document instructions for physical allotment where permitted.
• Not all offer documents or issuers may permit ASBA in every case; the offer document will state whether ASBA applications are accepted.

Example (illustrative)

An investor applies through ASBA for an IPO and requests allotment worth ₹100,000. The bank blocks ₹100,000 in the investor's account on receipt of the application. After allotment, the investor is allotted securities worth ₹40,000.

• The bank debits ₹40,000 from the investor's account for the allotted securities.
• The remaining blocked amount of ₹60,000 is immediately released and becomes available for use by the investor.

Conclusion

ASBA is a bank-facilitated mechanism designed to make subscription to primary market issues more convenient and efficient for investors. It preserves investor liquidity until allotment, reduces refund-related delays, and streamlines the application process through authorised banks. Investors should ensure they use an authorised bank (SCSB), provide correct demat and PAN details where required, and maintain sufficient funds in the account until the allotment process is complete.